Candlestick charts


(Alex Sherwood) #1

These have come up a couple of times in our support chats & I can understand why day or swing traders / people who believe in technical analysis might try to use them.

But I’m not aware of any situations where these might be help someone make a long term investment decision so I’m wondering whether anyone in the community knows of any? To be clear, I’m not suggesting that there aren’t any - this could just be a knowledge gap.


For anyone who’s not familiar with candlestick charts, according to Wikipedia

A candlestick chart is a style of financial chart used to describe price movements of a security.

Like a combination of line-chart and a bar-chart: each bar represents all four important pieces of information for that day: The open, the close, the high and the low. Being densely packed with information, they tend to represent trading patterns over short periods of time, often a few days or a few trading sessions.

Here’s a couple of examples of what one of these charts look like, from a random website that’s designed for day traders:

📷 click to open 1 week chart

📷 click to open 1 year chart


(Vladislav Kozub) #2

I find these very useful in terms of understanding the volatility (which normal graph cannot show if the close prices are similar).

I also believe that not every Freetrade user will benefit from these and there could a nice amicable solution - a toggle!

Mybe something like this?


(Alex Sherwood) #3

Thanks! So how does that feed into your decision making process for making a long term investment?


(Vladislav Kozub) #4

Long term - very low relevance for me personally but I am sure it may be different for more knowledgeable investors.

Short term - priceless. And not having to go to Yahoo finance for it would be great. By short I do not only mean day-trading, but a bit of swing trading. For instance, when Nvidia was 45% down recently, it went up 25% within a week (was a nice gain there!). Candlestick was quite useful :slight_smile:


(Alex Sherwood) #5

Ok great, it’s this that I’m really curious about :smile: hopefully there’s some (even more) ‘knowledgeable investors’ who can share more about this..


(Dave Smith) #6

I like them, but I suspect that’s mainly because I expect to see them. They are useful in swing trading, which is something I think freetrade will be very good for, you don’t need to buy and hold everything forever. And even on a long term trade you may want to use a bit of technical analysis to choose an entry point


(Simran Cashyap) #7

For my investments, I don’t use them. The ability to change the date period (and hence frequency) of a line chart combined with high / low prices over a period, are sufficient for me.

However, even for long term investments, I’m sure smarter people than me would use them as a market entry tool.


#8

I’m sure they are useful (or reassuring) for expert investors.

The counter argument would be that as most investors are investing for the long term and are non-expert, unless they’re decumulating they should probably simply follow a “just keep buying periodically” strategy, and so they don’t even need to see daily open/close prices, let alone the movement within the day.

I don’t swing trade and I’m not expert. I don’t look at the prices at all, nor do any stock analysis - for 95% of my portfolio anyway. (I do try think about the things like aims, risk attitude, investment behaviour, asset allocation etc though.)

FT’s mission is something like opening up investment to everyone, so the consideration will be whether adding detail to something makes it better or worse for that customer base.


(Chris) #9

For me, these fall under the “Other places have them, so Freetrade should” category. Which I think of as a bad category in general.
On the long timeline you’re looking at for Freetrade buying, these don’t provide any useful info that a the existing chart can’t.


(Harry) #10

I think they are completely and utterly useless. Investing in a company should be viewed like buying the entire enterprise, not based off short-term ‘indicators’. Don’t think they add value, and they provide unnecessary ‘noise’ for new and existing investors.


(Dave Smith) #11

The do work on longer timescales, it’s not just a short term indicator and you can see at a glance if the company went up or down in the last day/week/month or whatever timescale you are looking at. I don’t see that as useless or unnecessary noise


(Emma) #12

Doesn’t their normal graph show that anyway? If you look at the general trend it gives you as good an idea as the candlestick would for long term investing, without all the extra noise


(Kenny Grant) #13

I agree with this, these are not useful for investment and therefore should not be a focus. To my mind the existing graphs are already too biased toward short term moves in price (days/weeks) and need to move more toward a long term view.

As Freetrade offers very low cost trading there will always be pressure from people who want to use it to trade over days or weeks, but while it’s fine if people want to use the platform for that, Freetrade should resist catering to that market if you see your core value as long term investing - the more features added for short term trading, the farther Freetrade strays from that mission of opening up long term investment to everyone.

Also once a feature is added it has to be supported forever (dev costs, cops costs), so there is a significant cost beyond just the time for the initial work.


(Dave Smith) #14

I don’t see it as noise, if the price went up yesterday it’s a green bar, if it went down it’s a red bar. I see that as simple to read information.


(Vladislav Kozub) #15

It does, but without showing all the information. Day one stock opens at £100 and closes at £101. Day two it opens at £101 and closes at £102. A normal graph would show circa 1% growth per day (exagerated figures).

If a candlestick for the same company would show a fluctuation from £100 to £80 then back to £101 on day one and from £101 to £120 and then back to £102 on day two, that is a completely different perspective. For example, there may be people who do not like volatile companies in their portfolio and a candlestick will be a perfect solution to show that.


(Harry) #16

If you are looking for risk and volatility on stocks you should be looking at metrics such as beta, rather than short-term market volatility over a 2-day term.


(Vladislav Kozub) #17

2-day term was indicative, it could have been weekly/monthly/quarterly looking at a few years back. Beta is another option but if you want a quick glance - candlesticks are still useful.

Don’t get me wrong, I am not saying they are essential, but they can bring value to some without hurting the rest. If it was a hidden feature in setting which could be turned on by those who need it - that would have worked well in my opinion, without unnecessary complications for those who are not interested :slight_smile: